ZENERGY (03677) is at a pivotal juncture where industry cycles and capital cycles are aligning. Recently, the company signed an IPO coaching agreement with Guotai Junan Securities, formally initiating the process for a mainland A-share listing. This coincides with Goldman Sachs releasing a research report assigning ZENERGY a "Buy" rating, with a 12-month SoTP-based target price of HK$13.0, implying an upside potential of 139%. Goldman Sachs explicitly stated that ZENERGY is poised to be the fastest-growing Chinese battery company under its coverage and is one of the few that can sustain an ROIC consistently above its WACC while rapidly expanding. Currently trading at approximately 5.2x 2026E EV/EBITDA, it represents a discount of over 50% compared to the industry average of 12.3x, indicating ample valuation safety margin and significant potential for re-rating. The logic is clear: lean manufacturing builds a cost moat, a dual-driver strategy in automotive and storage positions it in high-growth sectors, and orderly capacity ramp-up matches high-certainty orders – ZENERGY is accelerating along a well-defined value chain. As Goldman Sachs' "Buy" rating and the A-share listing initiative converge, this lithium battery "dark horse," once undervalued by the market, may be at a new starting point for value discovery and realization.
Foundation of Strength: Lean Manufacturing Builds a Cost Moat, ROIC Exceeding WACC Validates Sustainable Value Creation
ZENERGY's fundamental competitiveness is rooted in its deep-seated lean manufacturing DNA. Founded in 2019, the company started relatively late, but its core management team brings extensive accumulated expertise in lean manufacturing, quality control, and cost management from the automotive components sector. This provides ZENERGY with a rare foundation in precision manufacturing within the lithium battery industry – a critical advantage in a field that emphasizes economies of scale and yield competition, forming the company's deepest moat and most central competitive barrier.
This lean manufacturing DNA is consistently translating into strong financial performance. With the release of scale effects, the company's unit labor costs have been declining continuously, and the period expense ratio has narrowed significantly from 19% in 2022 to 11% in 2025. The gross margin for power batteries has shown a year-on-year upward trend, reaching 13%, 16%, and 19% from 2023 to 2025 respectively. This reflects the sustained positive synergy between cost control and product mix upgrades during rapid capacity expansion, continuously solidifying the cost moat.
More crucially, Goldman Sachs explicitly noted that ZENERGY is the fastest-growing company under its coverage and one of only three battery companies where ROIC (Return on Invested Capital) consistently exceeds WACC (Weighted Average Cost of Capital). This fully demonstrates the company's sustainable value creation capability alongside rapid expansion. This metric is highly significant in a capital-intensive industry – it means that every unit of capital invested generates a return exceeding its cost, validating the rarity of its profit quality and resource allocation efficiency. Despite leading in both growth and profitability, ZENERGY's current valuation shows a significant discount, leaving substantial room for subsequent re-rating.
Dual Growth Engines: Power Battery Base with Advancing Customer Matrix, and Storage as a High-Growth Second Curve
ZENERGY's underlying lean manufacturing capability has been fully validated financially. This advantage in cost and efficiency is now accelerating its transformation from an "internal strength" into "external expansion" market competitiveness. The customer matrix, anchored by power batteries, is continuously advancing, while the energy storage business is rapidly taking shape as a second growth curve. A clear dual-driver revenue growth pattern has emerged.
In 2025, the company achieved total revenue of RMB 8.101 billion, a year-on-year increase of 57.9%. Power batteries contributed RMB 7.68 billion, accounting for 94.8% of total revenue and serving as the current core pillar of performance. More importantly, the power battery business is not merely about scale expansion – its gross margin jumped from 15.2% in 2024 to 18.9% in 2025, an increase of 3.7 percentage points. This is particularly impressive within the 2025 lithium battery industry, which saw deepening price wars, validating the systematic improvement in its customer structure and product premium capability through simultaneous volume and profit growth.
The continuous advancement of the customer matrix is the core driver behind the volume and profit growth of the power business. The company has established a diversified customer matrix encompassing "international brands + joint ventures + leading domestic brands + new EV makers." The customer structure is evolving from a focus on domestic brands and new EV makers to deeper penetration into joint venture and international brands, with the revenue contribution from joint venture customers increasing significantly. Given that joint venture brands typically have longer battery supplier certification cycles, higher switching costs, and better price linkage mechanisms leading to superior profitability, this upgrade in customer structure helps enhance profit visibility and stability. In 2025, the company's designated projects increased from 4 in 2021 to 47, and vehicle models in production grew from 1 to 21, with a customer retention rate as high as 95%, evidencing deep customer relationships and efficient order conversion.
While power batteries solidify the core business, the energy storage business is rapidly forming a second growth curve, poised to become the most elastic growth driver for the company over the next three years. This business currently has a small scale, primarily constrained by capacity bottlenecks – not due to lack of demand, but because capacity is yet to be fully released. Estimates suggest energy storage sales of 1.5/3.0/5.0 GWh for 2025-2027, positioning it on the cusp of a volume ramp-up from a near-zero base. Goldman Sachs believes the ESS business has achieved rapid growth starting from a low base. Looking forward, revenue growth is expected to remain robust at 67% year-on-year for the 2027 fiscal year and maintain a steady 20%-30% growth rate from fiscal 2028 to 2030, benefiting from continued market share gains in the power battery market.
The concurrent high demand in both power and storage sectors provides strong industry beta support for ZENERGY's shipment growth. Global new energy vehicle sales are projected to increase from 20.94 million units in 2025 to 33.36 million units in 2028, representing a CAGR of approximately 17%. Global energy storage battery shipments are expected to surge from 530 GWh in 2025 to 1,343 GWh in 2028, a CAGR of about 36%. By strategically positioning itself in these two high-growth sectors, coupled with the continuous advancement of its customer matrix and the accelerating formation of the storage second curve, the company's shipment volumes are entering an accelerated release phase, where scale effects are expected to continuously drive profit leaps.
Capacity Realization: Tiered Expansion Matches High-Certainty Orders, Driving Sustainable Profit Release
The continuous advancement of the customer matrix has opened vast growth potential on the revenue side. Translating this potential into actual performance depends on the orderly release and efficient realization of capacity. This is precisely ZENERGY's core advantage distinguishing it from many second-tier battery manufacturers – the high certainty of orders provides ample assurance for capacity expansion, while the tiered increase in capacity, in turn, strengthens customer supply confidence and stickiness, creating a sustained positive feedback loop between supply and demand.
The orderly release of capacity is the key link for ZENERGY to translate manufacturing capability and market demand into performance delivery. At the end of 2024, total capacity was 25.5 GWh with a utilization rate of 63%. By the end of 2025, this increased to 35.5 GWh, with the main increment coming from the 10 GWh Galaxy B Zone facility starting production in Q4. By the end of 2026, capacity is expected to further expand to 50.5 GWh, with an additional 15 GWh coming online by year-end. Goldman Sachs forecasts a capacity CAGR of 55% for the company from 2025 to 2028E, with the expansion pace highly aligned with customer order ramp-up, providing ample capacity reserve to meet continuously growing downstream demand.
This tiered capacity expansion is built upon highly certain order visibility. From 2025 to 2026, several strategic models, including the IM LS6, FAW Hongqi, and SAIC-GM vehicles, are set to ramp up volumes. Models like the Toyota bZ7, SAIC Volkswagen extended-range SUV, and Leapmotor's next-generation platform-based vehicles are also scheduled for launch. Deep binding with existing customers and orderly expansion of new clients continuously enhance the certainty of shipment growth.
The positive cycle of capacity expansion and order fulfillment resonates with the evolving industry supply-demand dynamics. Goldman Sachs assesses that the lithium battery industry is in a new upward profit cycle, with capacity expansion becoming more rational, primarily concentrated among first and second-tier companies with secured orders. ZENERGY currently has a full order book from customers, with key vehicle models ramping up volumes, creating a synergistic effect with new capacity releases. A self-reinforcing positive feedback loop has formed between capacity ramp-up and shipment growth. Profit estimates for the company from 2025 to 2027 project a revenue CAGR of approximately 54%, with net profit attributable to shareholders leaping from RMB 540 million to RMB 1.21 billion, and further to RMB 1.84 billion. The high consistency in profit forecasts from multiple institutions further validates the visibility of capacity release and profit realization. As the customer structure continues to upgrade towards joint venture brands and the storage second curve accelerates, this supply-demand positive feedback is expected to continue driving high-quality profit release for the company.
Conclusion: A Clear Value Chain and a Promising Re-rating Path
From the manufacturing cost barriers forged by lean manufacturing, to the dual revenue growth engines of automotive and storage, and the performance delivery path of tiered capacity expansion matching high-certainty orders, ZENERGY has established a set of interlocking, self-reinforcing positive value cycles. At an inflection point where the lithium battery industry's supply-demand landscape is gradually clearing and profit differentiation is significantly intensifying, companies possessing rare manufacturing heritage, high order visibility, and sustainable capital return capabilities deserve reasonable valuation premiums. Goldman Sachs also explicitly stated that the current valuation level of approximately 5.2x EV/EBITDA severely undervalues the scarcity of its high-quality growth. Standing at the starting point of alignment between industry and capital cycles, with the gradual formation of a dual A+H capital platform and the accelerating volume ramp-up of the storage second curve, ZENERGY is steadily progressing from "value undervaluation" towards "value re-rating," making its subsequent market capitalization recovery potential worthy of ongoing attention.
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